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Pressure Technologies – having questioned in February whether a profit warning was ahoy…

By Steve Moore | Wednesday 27 April 2016

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Reviewing the previous trading update from Pressure Technologies (PRES), I suggested a profit warning ahoy - see HERE. Just over two months later, an “Update on Recent Trading” includes that the board now “anticipate that the result for the year ending 1 October 2016 will be substantially below current market expectations”.

This is particularly as “the group's businesses dependent on the (oil and gas) industry have since experienced a further, substantial decline in orders in quarter two”, an outlook “for a slow recovery, particularly as oil inventories remain at historic highs” and alternative energy “revenue and profits from certain projects, which were expected to fall in the fourth quarter of the current financial year will probably fall into the first quarter of next year”.

This follows the February trading update having included that “the group is dependent on the timing of receipt of large orders in Cylinders and Alternative Energy to meet market expectations and the third quarter of the financial year will be critical to this”. This saw me note “Hmmm, profit warning ahoy? - as when a company operating in some clearly (and in this case self-admittedly) “extremely difficult markets” notes dependence on the receipt of some large orders, it seems safe to assume those orders won’t flow in as hoped.

That February update also noted that “cash requirements for the group remain well-controlled and we have comfortably complied with banking covenants”, with the company now further updating that “the board has continued to take measures to ensure the group remains cash positive, including a further significant reduction in headcount, alongside a commitment to productivity efficiencies”. Hmmm – banking covenants and now further measures having to be taken to enable cash generation is not an appealing combination and the shares are currently 29% lower on the day at 122.5p.

The company does note “we have seen gains in market share, as a result of market pressures on some of our competitors and our dependability and reputation for delivering quality products on time and in full” - and there may well be some recovery value here in future. However, with it also admitting “there is no escaping the effect the prolonged downturn is having and the difficulty in trying to call the ‘bottom’ of this cyclical downturn”, for me currently continued caution prevails here.

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  1. Lacking the invective and venom of Tom’s pieces, I feel that your articles don’t always get the attention and appreciation that they deserve.

    Here is yet another example of why I always find your writing insightful and thoughtful. This website is very far from being just a TW vehicle

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